The million dollar cost of LG’s refrigerator recall

By Patrick Avenell

SYDNEY, NSW: Today’s LG refrigerator recall will cost LG up to $6.6 million in consumer reparations, and that’s before the cost of actually repairing the refrigerators is calculated.

Sales figures obtained by Current.com.au show that LG sold up to 4,300 units across the six refrigerator models recalled. When this figure is extrapolated across LG’s considerable recall offer, it reveals the startlingly high cost of recalling a major electrical appliance.

Because LG is offering all affected consumers $200 in cash to cover inconvenience caused by the repair of the fridge, the recall cost starts a base of $860,000.

To further cover prolonged inconvenience, should it take longer than 48 hours to repair the refrigerator, LG is offering $50 per day, up to seven days, after the initial 48 hours. This has a maximum liability of $1.5 million.

In order to restore faith in the brand, LG is then offering all consumers a 50 per cent discount on their next LG purchase, up to a $1,000 discount. Should all customers take full advantage of this offer, LG will forfeit a massive $4.3 million in revenue.

In total, this recall could cost LG up to $6.6 million. At the very least, should all affected consumers come forward, and then claim their full discount, this recall will cost LG almost $5.2 million.

What is not considered in these calculations, however, is the cost of actually repairing the refrigerators. It is unknown how much that part of the process will cost the Korean manufacturer.

When presented with these figures, an LG spokesperson said, "This figure would be correct if all consumers received a refund. However, the cost of this recall is not LG's number one priority, customer safety is".

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